Friday, April 4, 2008

Yes I believe that it's time to let go of the penny. The coin is worth so little that it doesn't make any sense using it. At the same time - it costs the government about $130M every year to produce 12M worth of pennies. That's 1.2 billion coins, the lion share of which goes nowhere but the penny jars. I believe it's time to cash those in. Let those tons of copper be melted down and put to a good use.

Many people are worried that prices may go up once the penny is withdrawn; that merchants will always be rounding the prices up. That however didn't happen in Australia and New Zealand when those countries had abolished their 1- and 2-cent coins in early 1990s. Neither does it happen at our gas stations. Despite the lack of a coin worth one tenth of a cent, gas prices always include fractional value, such as 112.9¢. The 0.9¢ counts towards calculating the final amount of the purchase - but then the amount gets rounded up or down to the nearest penny.

Once the penny is gone - final amounts (not the actual prices) will be rounded up or down to the nearest nickel, making some of the purchases 1 or 2 cents more expensive and others - 1 or 2 cents cheaper. Overall, prices won't change. So I believe, scrapping the penny is a good idea. But demonetizing the coins overnight, leaving millions of Canadians with jars, piggy banks and charity cases full of useless scrap metal, as NDP MP Pat Martin proposes in his private member bill C-531 - is not the right way to do so.

Instead, Royal Canadian Mint could just stop producing any more pennies. As simple as that. Let's see how the money circulation goes without some 3-4 million pennies being minted each day. Then, once we see that people can handle the lack of pennies, the banks can start withdrawing the coins - just as it was done with the $1000 bill - once they get deposited, they're not released back into the circulation. Then, once most of the coins are withdrawn, it would make sense to demonetize the rest - most of which will have been melted down, used as washers by some handymen or otherwise destroyed anyway.